0001201800-13-000010.txt : 20130515 0001201800-13-000010.hdr.sgml : 20130515 20130515162612 ACCESSION NUMBER: 0001201800-13-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20130331 FILED AS OF DATE: 20130515 DATE AS OF CHANGE: 20130515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VASOMEDICAL, INC CENTRAL INDEX KEY: 0000839087 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 112871434 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18105 FILM NUMBER: 13847533 BUSINESS ADDRESS: STREET 1: 180 LINDEN AVENUE CITY: WESTBURY STATE: NY ZIP: 11590 BUSINESS PHONE: 516-997-4600 MAIL ADDRESS: STREET 1: 180 LINDEN AVENUE CITY: WESTBURY STATE: NY ZIP: 11590 FORMER COMPANY: FORMER CONFORMED NAME: VASOMEDICAL INC DATE OF NAME CHANGE: 19950517 FORMER COMPANY: FORMER CONFORMED NAME: FUTURE MEDICAL PRODUCTS INC /DE/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FUTURE MEDICAL PRODUCTS INC /NY/ DATE OF NAME CHANGE: 19920506 10-Q 1 vaso10q-march312013.htm vaso10q-march312013.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549


FORM 10-Q


[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2013

[   ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _______________ to ______________

Commission File Number: 0-18105
 


VASOMEDICAL, INC.
(Exact name of registrant as specified in its charter)
 

Delaware
11-2871434
(State or other jurisdiction of
(IRS Employer Identification Number)
incorporation or organization)
 

180 Linden Ave., Westbury, New York 11590
(Address of principal executive offices)

Registrant’s Telephone Number
(516) 997-4600

 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes [X]    No  [   ]


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
Large Accelerated Filer [  ] Accelerated Filer [  ] Non-Accelerated Filer [  ] Smaller Reporting Company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes [   ] No  [X]

Number of Shares Outstanding of Common Stock, $.001 Par Value, at May 10, 2013 –163,263,623
 
 
Page 1

 
Vasomedical, Inc. and Subsidiaries

 
INDEX
 
 
 
 
Page 2

 
Vasomedical, Inc. and Subsidiaries
(in thousands, except share data)

   
March 31, 2013
   
December 31, 2012
 
ASSETS
 
(unaudited)
   
 
 
CURRENT ASSETS
           
Cash and cash equivalents
  $ 12,899     $ 11,469  
Short-term investments
    111       110  
Accounts and other receivables, net of an allowance for doubtful
               
accounts and commission adjustments of $2,842 at March 31,
               
2013 and $3,179 at December 31, 2012
    4,735       9,145  
Receivables due from related parties
    20       25  
Inventories, net
    2,163       2,166  
Financing receivables, net
    11       16  
Deferred commission expense
    2,460       2,480  
Deferred related party consulting expense
    -       85  
Other current assets
    270       220  
 Total current assets
    22,669       25,716  
                 
PROPERTY AND EQUIPMENT, net of accumulated depreciation of
               
$1,212 at March 31, 2013 and $1,161 at December 31, 2012
    434       473  
GOODWILL
    3,234       3,212  
OTHER ASSETS, net
    2,464       2,980  
    $ 28,801     $ 32,381  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
CURRENT LIABILITIES
               
Accounts payable
  $ 455     $ 342  
Accrued commissions
    1,474       2,337  
Accrued expenses and other liabilities
    4,029       4,627  
Sales tax payable
    152       177  
Deferred revenue - current portion
    10,222       10,580  
Deferred tax liability, net
    112       112  
Notes payable due to related party
    3       3  
Total current liabilities
    16,447       18,178  
                 
LONG-TERM LIABILITIES
               
Deferred revenue
    3,594       5,022  
Other long-term liabilities
    333       171  
Total long-term liabilities
    3,927       5,193  
                 
COMMITMENTS AND CONTINGENCIES (NOTE M)
               
                 
STOCKHOLDERS' EQUITY
               
Preferred stock, $.01 par value; 1,000,000 shares authorized; nil shares
               
 issued and outstanding at March 31, 2013, and December 31, 2012
    -       -  
Common stock, $.001 par value; 250,000,000 shares authorized;
               
163,240,737 and 162,917,996 shares issued and outstanding
               
 at March 31, 2013 and December 31, 2012
    163       163  
Additional paid-in capital
    61,331       61,229  
Accumulated deficit
    (53,068 )     (52,416 )
Accumulated other comprehensive income
    1       34  
Total stockholders’ equity
    8,427       9,010  
    $ 28,801     $ 32,381  
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
Page 3

 
Vasomedical, Inc. and Subsidiaries

(Unaudited)
(in thousands, except per share data)
 
      Three months ended March 31,  
   
2013
   
2012
 
Revenues
           
Equipment sales
  $ 877     $ 1,453  
Equipment rentals and services
    407       533  
Commissions
    6,009       4,057  
Total revenues
    7,293       6,043  
                 
Cost of revenues
               
Cost of sales, equipment
    293       606  
Cost of equipment rentals and services
    242       293  
Cost of commissions
    1,696       963  
Total cost of revenues
    2,231       1,862  
Gross profit
    5,062       4,181  
                 
Operating expenses
               
Selling, general and administrative
    5,604       5,330  
Research and development
    140       152  
Total operating expenses
    5,744       5,482  
Operating loss
    (682 )     (1,301 )
                 
Other income (expenses)
               
Interest and financing costs
    (2 )     (3 )
Interest and other income (expense), net
    40       (28 )
Amortization of deferred gain on
               
sale-leaseback of building
    -       13  
Total other income (expenses), net
    38       (18 )
                 
Loss before income taxes
    (644 )     (1,319 )
Income tax expense
    (8 )     (25 )
Net loss
    (652 )     (1,344 )
                 
Other comprehensive loss
               
Foreign currency translation loss
    (34 )     (22 )
Comprehensive loss
  $ (686 )   $ (1,366 )
                 
Loss per common share
               
- basic and diluted
  $ (0.00 )   $ (0.01 )
                 
Weighted average common shares outstanding
               
- basic and diluted
    162,117       154,377  
                 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
Page 4

 
Vasomedical, Inc. and Subsidiaries

(Unaudited)
(in thousands)
   
  Three months ended
 
   
March 31, 2013
   
March 31, 2012
 
Cash flows from operating activities
           
Net  loss
  $ (652 )   $ (1,344 )
Adjustments to reconcile net loss to net cash
               
  provided by operating activities
               
Depreciation and amortization
    91       49  
Amortization of deferred gain on sale-leaseback of building
    -       (13 )
Provision for doubtful accounts and commission adjustments
    17       (74 )
Share-based compensation
    137       129  
Amortization of deferred consulting expense
    86       152  
Changes in operating assets and liabilities:
    -          
Accounts and other receivables
    4,359       14,640  
Receivables due from related parties
    5       158  
Inventories, net
    4       226  
Deferred commission expense
    21       (472 )
Other current assets
    (45 )     (91 )
Other assets
    477       287  
Accounts payable
    113       89  
Accrued commissions
    (863 )     (1,969 )
Accrued expenses and other  liabilities
    (604 )     (278 )
Sales tax payable
    (25 )     43  
Income taxes payable
    -       (177 )
Deferred revenue
    (1,786 )     (447 )
Deferred tax liability
    -       (1 )
Other long-term liabilities
    162       115  
Net cash provided by operating activities
    1,497       11,022  
                 
Cash flows from investing activities
               
Purchases of property and equipment
    (12 )     (113 )
Purchases of short-term investments
    (40 )     -  
Redemption of short-term investments
    40       -  
Net cash used in investing activities
    (12 )     (113 )
                 
Cash flows from financing activities
               
Proceeds from exercise of warrant
    -       343  
Repayment of notes payable due to related party
    -       (190 )
Net cash provided by financing activities
    -       153  
Effect of exchange rate differences on cash and cash equivalents
    (55 )     (25 )
                 
NET INCREASE IN CASH AND CASH EQUIVALENTS
    1,430       11,037  
Cash and cash equivalents - beginning of period
    11,469       2,294  
Cash and cash equivalents - end of period
  $ 12,899     $ 13,331  
                 
SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION
               
Interest paid
  $ -     $ 2  
Income taxes paid
  $ 24     $ 186  
                 
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
         
Inventories transferred to property and equipment,
               
attributable to operating leases, net
  $ 2     $ 12  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
Page 5

 
Vasomedical, Inc. and Subsidiaries
 
 
NOTE A - ORGANIZATION AND PLAN OF OPERATIONS

Vasomedical, Inc. was incorporated in Delaware in July 1987. Unless the context requires otherwise, all references to “we”, “our”, “us”, “Company”, “registrant”, “Vasomedical” or “management” refer to Vasomedical, Inc. and its subsidiaries. Until 2010, we were primarily engaged in designing, manufacturing, marketing and supporting EECP® enhanced external counterpulsation systems based on our unique proprietary technology currently indicated in the United States for use in cases of stable or unstable angina (i.e., chest pain), congestive heart failure (“CHF”), acute myocardial infarction (i.e., heart attack, "MI") and cardiogenic shock.  In May 2010, the Company, through its wholly-owned subsidiary Vaso Diagnostics, Inc. d/b/a VasoHealthcare, expanded into the sales representation business via its agreement with GE Healthcare (“GEHC”), the healthcare business unit of General Electric Company (NYSE: GE), to be GEHC’s exclusive sales representative for the sale of select GEHC diagnostic imaging products in specific market segments in the 48 contiguous states of the United States and the District of Columbia.   In June 2012, the Company entered into an amendment, effective July 1, 2012, of the sales representative agreement (“GEHC Agreement”) extending the initial term of three years commencing July 1, 2010 to five years through June 30, 2015, subject to earlier termination under certain circumstances.

In September 2011, the Company acquired Fast Growth Enterprises Limited (FGE), a British Virgin Islands company which, through its subsidiaries, owns and controls two Chinese operating companies - Life Enhancement Technologies Ltd. and Biox Instruments Co. Ltd., respectively – to expand its technical and manufacturing capabilities and to enhance its distribution network, technology, and product portfolio.  Also in September 2011, the Company restructured to further align its business management structure and long-term growth strategy and now operates through three wholly-owned subsidiaries.  Vaso Diagnostics d/b/a VasoHealthcare continues as the operating subsidiary for the sales representation of GE Healthcare diagnostic imaging products; Vasomedical Global Corp. operates the Company’s Chinese companies; and Vasomedical Solutions, Inc. manages and coordinates our EECP® therapy business as well as other medical equipment operations.

We report the operations of Vasomedical Global Corp. and Vasomedical Solutions, Inc. under our Equipment segment.  VasoHealthcare activities are included under our Sales Representation segment (See Note C).

NOTE B - BASIS OF PRESENTATION AND CRITICAL ACCOUNTING POLICIES

Basis of Presentation and Use of Estimates

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and disclosures normally included in the condensed consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in connection with the audited consolidated financial statements and related notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the SEC. These condensed consolidated financial statements include the accounts of the companies over which we exercise control. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of interim results for the Company. The results of operations for any interim period are not necessarily indicative of results to be expected for any other interim period or the full year.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated financial statements, the disclosure of contingent assets and liabilities in the condensed consolidated financial statements and the accompanying notes, and the reported amounts of revenues, expenses and cash flows during the periods presented. Actual amounts and results could differ from those estimates. The estimates and assumptions the Company makes are based on historical factors, current circumstances and the experience and judgment of the Company's management. The Company evaluates its estimates and assumptions on an ongoing basis.

 
Page 6

 
Vasomedical, Inc. and Subsidiaries
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 
Significant Accounting Policies
 
Note B of the Notes to Consolidated Financial Statements, included in the Annual Report on Form 10-K for the year ended December 31, 2012, includes a summary of the significant accounting policies used in the preparation of the condensed consolidated financial statements.
 
Revenue and Expense Recognition for VasoHealthcare

The Company recognizes commission revenue in its Sales Representation segment (see Note C) when persuasive evidence of an arrangement exists, service has been rendered, the price is fixed or determinable and collectability is reasonably assured.  These conditions are deemed to be met when the underlying equipment has been accepted at the customer site in accordance with the specific terms of the sales agreement.  Consequently, amounts billable under the agreement with GE Healthcare in advance of the customer acceptance of the equipment are recorded as accounts receivable and deferred revenue in the condensed consolidated balance sheets.  Similarly, commissions payable to our sales force related to such billings are recorded as deferred commission expense when the associated deferred revenue is recorded.  Commission expense is recognized when the corresponding commission revenue is recognized.  Cost of commissions includes commission expense and, beginning in 2013, costs associated with the medical device excise tax imposed by the Affordable Care Act.

Reclassifications
 
Certain reclassifications have been made to prior period amounts to conform with the current period presentation.

NOTE C – SEGMENT REPORTING AND CONCENTRATIONS

The Company views its business in two segments – the Equipment segment and the Sales Representation segment.  The Equipment segment is engaged in designing, manufacturing, marketing and supporting EECP® enhanced external counterpulsation systems both domestically and internationally, as well as the development, production, marketing and supporting of other medical devices.  The Sales Representation segment operates through the VasoHealthcare subsidiary and is currently engaged solely in the fulfillment of the Company’s responsibilities under our agreement with GEHC.  The Company evaluates segment performance based on operating income.  Administrative functions such as finance, human resources, and information technology are centralized and related expenses allocated to each segment.  Other costs not directly attributable to operating segments, such as audit, legal, director fees, investor relations, and others, as well as certain assets – primarily cash balances – are reported in the Corporate entity below.  There are no intersegment revenues.  Summary financial information for the segments is set forth below:

 
Page 7

 
Vasomedical, Inc. and Subsidiaries
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 
                
    (in thousands)  
      As of or for the three months ended March 31, 2013  
   
Equipment Segment
 
Sales Representation Segment
 
Corporate
   
Consolidated
 
                         
Revenues from external customers
  $ 1,284     $ 6,009     $ -     $ 7,293  
Operating (loss) income
  $ (643 )   $ 362     $ (401 )   $ (682 )
Total assets
  $ 7,529     $ 8,485     $ 12,783     $ 28,797  
Accounts and other receivables, net
  $ 618     $ 4,117     $ -     $ 4,735  
Deferred commission expense
  $ -     $ 4,032     $ -     $ 4,032  
                                 
                                 
        As of or for the three months ended March 31, 2012
   
Equipment Segment
 
Sales Representation Segment
 
Corporate
   
Consolidated
 
                                 
Revenues from external customers
  $ 1,986     $ 4,057     $ -     $ 6,043  
Operating loss
  $ (157 )   $ (796 )   $ (348 )   $ (1,301 )
Total assets
  $ 9,227     $ 8,381     $ 13,010     $ 30,618  
Accounts and other receivables, net
  $ 1,224     $ 4,313     $ -     $ 5,537  
Deferred commission expense
  $ -     $ 3,399     $ -     $ 3,399  
                                 

For the three months ended March 31, 2013 and 2012, GE Healthcare accounted for 82% and 67% of revenue, respectively.  Also, GE Healthcare accounted for $4.0 million, or 84%, and $8.1 million, or 89%, of accounts and other receivables at March 31, 2013 and December 31, 2012, respectively.

NOTE D – SHARE-BASED COMPENSATION

The Company complies with ASC Topic 718 “Compensation – Stock Compensation” (“ASC 718”), which requires all share-based awards to employees, including grants of employee stock options, to be recognized in the condensed consolidated financial statements based on their estimated fair values.

During the three month period ended March 31, 2013, the Company granted 60,000 restricted shares of common stock to employees.  The shares vested immediately and were valued at $10,800.  During the three months ended March 31, 2012, the Company granted 500,000 shares of restricted common stock, valued at $120,000, to an officer, of which half vested immediately and the remainder during the quarter ended March 31, 2013.

During the three-month periods ended March 31, 2013 and 2012, the Company did not grant any stock options.

Share-based compensation expense recognized for the three months ended March 31, 2013 and 2012 was $137,000 and $129,000, respectively.  These expenses are included in cost of revenues; selling, general, and administrative expenses; and research and development expenses in the condensed consolidated statements of operations.  Expense for share-based arrangements was $86,000 and $152,000 for the three months ended March 31, 2013 and 2012, respectively.  Unrecognized expense related to existing share-based compensation and arrangements is approximately $253,000 at March 31, 2013 and will be recognized through July 2014.
 
 
Page 8

 
Vasomedical, Inc. and Subsidiaries
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE E – LOSS PER COMMON SHARE

 Basic loss per common share is computed as earnings applicable to common stockholders divided by the weighted-average number of common shares outstanding for the period.  Diluted loss per common share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted to common stock.

  The following table represents common stock equivalents that were excluded from the computation of diluted earnings per share for the three months ended March 31, 2013 and 2012, because the effect of their inclusion would be anti-dilutive.
                                         
    (in thousands)  
      For the three months ended  
   
March 31, 2013
   
March 31, 2012
 
Stock options
    1,780       1,810  
Warrants
    1,500       1,500  
Contingently issuable shares
    -       2,000  
Common stock grants
    2,188       2,948  
      5,468       8,258  
 
 
NOTE F – FAIR VALUE MEASUREMENTS

The Company complies with the provisions of ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”).  Under ASC 820, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.
 
 
Page 9

 
Vasomedical, Inc. and Subsidiaries
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following tables present information about the Company’s assets measured at fair value as of March 31, 2013 and December 31, 2012:
           
    (in thousands)  
   
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
   
Significant
Other
Observable
Inputs
(Level 2)
   
 
Significant
Unobservable
Inputs
(Level 3)
   
 
Balance
as of
March 31,
2013
 
Assets
                   
(unaudited)
 
Cash equivalents invested in money market funds
(included in cash and cash equivalents)
  $ 11,641     $ -     $ -     $ 11,641  
Investment in certificates of deposit
(included in short-term investments)
    111                       111  
    $ 11,752     $ -     $ -     $ 11,752  
                                 
   
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
   
Significant
Other
Observable
Inputs
(Level 2)
   
Significant
Unobservable
Inputs
(Level 3)
     
Balance
as of
December 31,
2012
 
Assets
                               
Cash equivalents invested in money market funds
(included in cash and cash equivalents)
  $ 9,124     $ -     $ -     $ 9,124  
Investment in certificates of deposit
(included in short-term investments)
    110                       110  
    $ 9,234     $ -     $ -     $ 9,234  
 
The fair values of the Company’s cash equivalents invested in money market funds are determined through market, observable and corroborated sources.

NOTE G – ACCOUNTS AND OTHER RECEIVABLES, NET

The following table presents information regarding the Company’s accounts and other receivables as of March 31, 2013 and December 31, 2012:
 
    (in thousands)  
   
March 31, 2013
   
December 31, 2012
 
   
(unaudited)
       
Trade receivables
  $ 7,432     $ 12,193  
Due from employees
    145       131  
Allowance for doubtful accounts and
               
commission adjustments
    (2,842 )     (3,179 )
Accounts and other receivables, net
  $ 4,735     $ 9,145  
 
 
Page 10

 
Vasomedical, Inc. and Subsidiaries
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 
Trade receivables include amounts due for shipped products and services rendered. Amounts currently due under the GEHC Agreement are subject to adjustment in subsequent periods should the underlying sales order amount, upon which the receivable is based, change.
 
Allowance for doubtful accounts and commission adjustments include estimated losses resulting from the inability of our customers to make required payments, and adjustments arising from subsequent changes in sales order amounts that may reduce the amount the Company will ultimately receive under the GEHC Agreement. Due from employees is primarily commission advances made to sales personnel.
 
NOTE H – INVENTORIES, NET

Inventories, net of reserves, consist of the following:
                                  
    (in thousands)  
   
March 31, 2013
   
December 31, 2012
 
   
(unaudited)
       
Raw materials
  $ 795     $ 909  
Work in process
    612       483  
Finished goods
    756       774  
    $ 2,163     $ 2,166  

 
At March 31, 2013 and December 31, 2012, the Company maintained reserves for excess and obsolete inventory of $576,000.
 
NOTE I – GOODWILL AND OTHER INTANGIBLES

Goodwill aggregating $3,234,000 and $3,212,000 was recorded on the Company’s condensed consolidated balance sheets at March 31, 2013 and December 31, 2012, respectively, pursuant to the acquisition of FGE in September 2011.  All of the goodwill was allocated to the Company’s Equipment segment.  The components of the change in goodwill are as follows:
                                                                                                             
    (in thousands)  
   
Carrying Amount
 
       
Balance at December 31, 2012
  $ 3,212  
Foreign currency translation
    22  
Balance at March 31, 2013
  $ 3,234  

The Company’s other intangible assets consist of capitalized patent costs, customer lists and software costs, as follows:
 
 
Page 11

 
Vasomedical, Inc. and Subsidiaries
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
                                                                                                                                          
    (in thousands)  
   
March 31, 2013
   
December 31, 2012
 
 
  (unaudited)        
Patents            
Costs
  $ 469     $ 469  
Accumulated amortization
    (442 )     (438 )
      27       31  
                 
Customer lists
               
Costs
    800       800  
Accumulated amortization
    (181 )     (152 )
      619       648  
                 
Software
               
Costs
    543       541  
Accumulated amortization
    (395 )     (386 )
      148       155  
                 
    $ 794     $ 834  
 
Patents, customer lists, and software are included in other assets in the accompanying condensed consolidated balance sheets and are amortized on a straight line basis over their estimated useful lives of ten, seven, and five years, respectively.  Amortization expense amounted to $42,000 and $7,000 for the three months ended March 31, 2013 and 2012, respectively.

NOTE J - DEFERRED REVENUE

The changes in the Company’s deferred revenues are as follows:
 
    (in thousands)  
      For the three months ended March 31,  
   
2013
   
2012
 
   
(unaudited)
   
(unaudited)
 
Deferred revenue at the beginning of the period
  $ 15,602     $ 15,227  
Additions:
               
Deferred extended service contracts
    150       327  
Deferred in-service and training
    5       5  
Deferred service arrangements
    10       25  
Deferred commission revenues
    1,008       1,350  
Recognized as revenue:
               
Deferred extended service contracts
    (260 )     (275 )
Deferred in-service and training
    (1 )     (3 )
Deferred service arrangements
    (19 )     (22 )
Deferred commission revenues
    (2,679 )     (1,853 )
Deferred revenue at end of period
    13,816       14,781  
Less: current portion
    10,222       10,620  
Long-term deferred revenue at end of period
  $ 3,594     $ 4,161  

NOTE K – RELATED-PARTY TRANSACTIONS

On June 21, 2007, we entered into a Securities Purchase Agreement with Kerns Manufacturing Corp. (”Kerns”).  Pursuant to this agreement, a five-year warrant to purchase 4,285,714 shares of our common stock at an initial exercise price of $0.08 per share was issued to Kerns.  In March 2012, Kerns exercised its warrant and purchased 4,285,714 shares of common stock.

 
Page 12

 
Vasomedical, Inc. and Subsidiaries
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 
On February 28, 2011, David Lieberman and Edgar Rios were appointed by the Board of Directors as directors of the Company.  Mr. Lieberman, a practicing attorney in the State of New York, was also appointed to serve as the Vice Chairman of the Board.  He is currently a senior partner at the law firm of Beckman, Lieberman & Barandes, LLP, which performs certain legal services for the Company.  Fees of approximately $60,000 and $67,000 were billed by the firm through the three months ended March 31, 2013 and 2012, respectively, at which date no amounts were outstanding.
 
Mr. Rios currently is President of Edgary Consultants, LLC, and was appointed a director in conjunction with the Company’s consulting agreement with Edgary Consultants, LLC.  The consulting agreement (the “Agreement”) between the Company and Edgary Consultants, LLC (“Consultant”) commenced on March 1, 2011 and was for a two year term and expired on February 28, 2013.  The Agreement provided for the engagement of Consultant to assist the Company in seeking broader reimbursement coverage of EECP® therapy.  

In consideration for the services to be provided by Consultant under the Agreement, the Company agreed to issue to Consultant or its designees, up to 18,500,000 shares of restricted common stock of the Company, 3,000,000 of which were issued in March 2011 and the balance was to be earned on performance. Mr. Lieberman received 600,000 of these restricted shares.  The Company recorded the fair value of the shares issued to Consultant as a prepaid expense and amortized the cost ratably over the two year agreement.  The unamortized value is reported as deferred related party consulting expense in our accompanying condensed consolidated balance sheets as of December 31, 2012.  No performance-based shares were issued and no further compensation is expected to be paid in conjunction with the agreement.

During the three months ended March 31, 2012, a director performed consulting services for the Company aggregating approximately $10,000.

Through the Company’s acquisition of FGE in September 2011, it assumed the liability for $288,000 in unsecured notes payable to the President of LET and his spouse, of which $95,000 was repaid in December 2011, and $190,000, bearing interest at 6% per annum, was paid in March 2012.  In addition, receivables due from FGE management aggregating $5,000 and $158,000 were collected during the three months ended March 31, 2013 and 2012, respectively.

NOTE L – STOCKHOLDERS’ EQUITY

Common Stock
 
See Note K for discussion of common stock issued during the three months ended March 31, 2012 in connection with related party agreements.  In addition, during the three months ended March 31, 2013 and 2012, the Company issued 322,741 and 62,500 shares of common stock, respectively, to employees and consultants.
 
On June 17, 2010 the Board of Directors approved the 2010 Stock Plan (the “2010 Plan”) for officers, directors, employees and consultants of the Company.  The stock issuable under the 2010 Plan shall be shares of the Company’s authorized but unissued or reacquired common stock.  The maximum number of shares of common stock which may be issued under the 2010 Plan is 5,000,000 shares.

The 2010 Plan is comprised of two separate equity programs, the Options Grant Program, under which eligible persons may be granted options to purchase shares of common stock, and the Stock Issuance Program, under which eligible persons may be issued shares of common stock directly, either through the immediate purchase of such shares or as compensation for services rendered to the Company.  The 2010 Plan provides that the Board of Directors, or a committee of the Board of Directors, will administer it with full authority to determine the identity of the recipients of the options or shares and the number of options or shares.

As of March 31, 2013, 3,790,000 restricted shares of common stock were granted under the 2010 Plan to non-officer employees and consultants of the Company.  As of March 31, 2013, 935,000 shares have been forfeited.  In March 2012, 500,000 restricted shares of common stock were granted under the 2010 Plan to an officer, of which 250,000 vested immediately with the remainder vesting over a one year period.  In June 2012, 2,392,500 additional shares, vesting at various times through July 1, 2013, of restricted common stock were granted to non-officer employees in conjunction with the extension of the GEHC Agreement, of which 365,500 shares had been forfeited as of March 31, 2013.

 
Page 13

 
Vasomedical, Inc. and Subsidiaries
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
 
No options were issued under the 2010 Plan during the three months ended March 31, 2013 and 2012.

Preferred Stock

Pursuant to its conversion terms, all Series E preferred stock was deemed automatically converted to common stock effective July 1, 2011. As of December 31, 2011, 712,350 shares of common stock were yet to be issued.  647,600 shares were issued during the three months ended March 31, 2012, and all remaining shares were issued the following quarter.

NOTE M – COMMITMENTS AND CONTINGENCIES

Sales representation agreement

In June 2012, the Company concluded an amendment of the GEHC Agreement with GE Healthcare, originally signed on May 19, 2010.  The amendment, effective July 1, 2012, extended the initial term of three years commencing July 1, 2010 to five years through June 30, 2015, subject to earlier termination under certain circumstances.  These circumstances include not materially achieving certain sales goals, not maintaining a minimum number of sales representatives, and various legal and GEHC policy requirements.  Under the terms of the agreement, the Company is required to lease dedicated computer equipment from GEHC for connectivity to their network.
 
In conjunction with the extension of the GEHC Agreement, the Company granted VasoHealthcare employees both stock and cash-based performance incentives for the ensuing year.  The incentives provide for cash payments of up to $2.4 million and 2.4 million shares of restricted common stock grants and vest at various times through July 1, 2013.  A condition of the incentives is that the employees remain continuously employed through the vesting dates.  As of March 31, 2013, approximately $0.5 million and 0.5 million shares remain unvested.

NOTE N - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Adoption of New Standards
 
Other Comprehensive Income:  Presentation of Comprehensive Income
 
In February 2013, new guidance was issued that amends the current comprehensive income guidance.  The new guidance requires entities to disclose the effect of each item that was reclassified in its entirety out of accumulated other comprehensive income and into net income on each affected net income line item.  For reclassification items that are not reclassified in their entirety into net income, a cross-reference to other required disclosures is required. The new guidance is to be applied prospectively for annual reporting periods beginning after December 15, 2012 and interim periods within those years.  The adoption of this new guidance did not have an impact on the Company’s consolidated financial position, results of operations, or cash flows.

NOTE O – SUBSEQUENT EVENT

In April 2013, the Company’s Board of Directors authorized a share repurchase program of up to $1.5 million of the Company’s common stock.  As of April 30, 2013, this would represent approximately 5% of the total outstanding shares of Vasomedical common stock and 248,577 shares have been repurchased through such date.
 
 
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Vasomedical, Inc. and Subsidiaries
 

Except for historical information contained in this report, the matters discussed are forward-looking statements that involve risks and uncertainties. When used in this report, words such as “anticipates”, “believes”, “could”, “estimates”, “expects”, “may”, “plans”, “potential” and “intends” and similar expressions, as they relate to the Company or its management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of the Company’s management, as well as assumptions made by and information currently available to the Company’s management. Among the factors that could cause actual results to differ materially are the following: the effect of business and economic conditions; the effect of the dramatic changes taking place in the healthcare environment; the impact of competitive procedures and products and their pricing; medical insurance reimbursement policies; unexpected manufacturing or supplier problems; unforeseen difficulties and delays in the conduct of clinical trials and other product development programs; the actions of regulatory authorities and third-party payers in the United States and overseas; uncertainties about the acceptance of a novel therapeutic modality by the medical community; continuation of the GEHC Agreement and the risk factors reported from time to time in the Company’s SEC reports, including its recent report on Form 10-K.  The Company undertakes no obligation to update forward-looking statements as a result of future events or developments.

General Overview

Vasomedical, Inc. was incorporated in Delaware in July 1987.  Unless the context requires otherwise, all references to “we”, “our”, “us”, “Company”, “registrant”, “Vasomedical” or “management” refer to Vasomedical, Inc. and its subsidiaries.  Until 2010, we were primarily engaged in designing, manufacturing, marketing and supporting EECP® Enhanced External Counterpulsation systems, based on our proprietary technology, to physicians and hospitals throughout the United States and in select international markets.

In May 2010, the Company, through its wholly-owned subsidiary Vaso Diagnostics, Inc. d/b/a VasoHealthcare, expanded into the sales representation business via its agreement with GE Healthcare (“GEHC”), the healthcare business unit of General Electric Company (NYSE: GE), to be GEHC’s exclusive sales representative for the sale of select GEHC diagnostic imaging products in specific market segments in the 48 contiguous states of the United States and the District of Columbia.   In June 2012, the Company entered into an amendment, effective July 1, 2012, of the sales representative agreement (“GEHC Agreement”) extending the initial term of three years commencing July 1, 2010 to five years through June 30, 2015, subject to earlier termination under certain circumstances.

In September 2011, the Company acquired Fast Growth Enterprises Limited (FGE), a British Virgin Islands company, which, through its subsidiaries, owns and controls two Chinese operating companies - Life Enhancement Technology Ltd. and Biox Instruments Co. Ltd., respectively - to expand its technical and manufacturing capabilities and to enhance its distribution network, technology, and product portfolio.  Also in September 2011, the Company restructured to further align its business management structure and long-term growth strategy, and now operates through three wholly-owned subsidiaries.  Vaso Diagnostics d/b/a VasoHealthcare continues as the operating subsidiary for the sales representation of GE diagnostic imaging products; Vasomedical Global Corp. operates the Company’s Chinese companies; and Vasomedical Solutions, Inc. was formed to manage and coordinate our EECP® therapy business as well as other medical equipment operations.

We now report the operations of Vasomedical Global Corp. and Vasomedical Solutions, Inc. under our Equipment segment.  VasoHealthcare activities are included under our Sales Representation segment (see Note C).

The Company expects to achieve profitability through reaching a higher commission rate under the GEHC Agreement, growth in our China operations and by expanding our product portfolio.  In addition, the Company plans to pursue other accretive acquisitions in the international and domestic markets and to expand our sales representation business.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon the accompanying unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Although these estimates are based on our knowledge of current events, our actual amounts and results could differ from those estimates. The estimates made are based on historical factors, current circumstances, and the experience and judgment of our management, who continually evaluate the judgments, estimates and assumptions and may employ outside experts to assist in the evaluations.

 
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Vasomedical, Inc. and Subsidiaries
 
Certain of our accounting policies are deemed “critical”, as they are both most important to the financial statement presentation and require management’s most difficult, subjective or complex judgments as a result of the need to make estimates about the effect of matters that are inherently uncertain. For a discussion of our critical accounting policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2012.

Results of Operations - For the Three Months Ended March  31, 2013 and 2012
 
Total revenue for the three months ended March 31, 2013 and March 31, 2012, was $7,293,000 and $6,043,000, respectively, an increase of $1,250,000, or 21%. Net loss for the three months ended March 31, 2013 was $652,000 compared to a net loss of $1,344,000 for the three months ended March 31, 2012.  The decrease in net loss was primarily attributable to a $881,000 increase in gross profit, partially offset by a $274,000 increase in selling, general and administrative costs.  Our total net loss was $0.00 and $0.01 per basic and diluted common share for the three months ended March 31, 2013 and 2012, respectively.

Revenues
 
Revenue in our Equipment segment decreased by $702,000, or 35%, to $1,284,000 for the three-month period ended March 31, 2013 from $1,986,000 for the same period of the prior year.  Equipment segment revenue from equipment sales decreased by $576,000, or 40%, to $877,000 for the three-month period ended March 31, 2013 as compared to $1,453,000 for the same period in the prior year primarily due to a decrease of $523,000 in EECP® revenues as a result of lower sales volume.
 
Current demand for EECP® systems domestically will likely remain soft until there is greater clinical acceptance for the use of EECP® therapy in treating patients with angina or angina equivalent symptoms who meet the current reimbursement guidelines, or a favorable change in current reimbursement policies by CMS or third party payers to consider EECP therapy as a first-line treatment option for angina or cover some or all Class II & III heart failure patients. Patients with angina or angina equivalent symptoms eligible for reimbursement under current policies include many with serious comorbidities, such as heart failure, diabetes, peripheral vascular disease and/or others.
 
Equipment segment revenue from equipment rental and services decreased 24% to $407,000 in the first quarter of 2013 from $533,000 in the first quarter of 2012. Revenue from equipment rental and services represented 32% and 27% of total Equipment segment revenue in the first quarters of fiscal 2013 and fiscal 2012, respectively.  The decrease in revenue generated from equipment rentals and services is due primarily to decreased accessory part and field service revenues.

 
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Vasomedical, Inc. and Subsidiaries
 
Commission revenues in the Sales Representation segment were $6,009,000 in the first quarter of 2013, as compared to $4,057,000 in the first quarter of 2012, an increase of 48%.  The increase in commission revenue in the first quarter of 2013 is due primarily to an increase in volume of equipment delivered by GEHC.  The Company recognizes revenue when the underlying equipment has been accepted at the customer site in accordance with the specific terms of the sales agreement.  Consequently, amounts billable under the agreement with GE Healthcare prior to customer acceptance of the equipment are recorded as deferred revenue in the condensed consolidated balance sheet.  As of March 31, 2013, $12,662,000 in deferred commission revenue was recorded in the Company’s condensed consolidated balance sheet, of which $3,168,000 is long-term.  At March 31, 2012, $13,581,000 in deferred commission revenue was recorded in the Company’s condensed consolidated balance sheet, of which $3,796,000 was long-term.

Gross Profit

The Company had a gross profit of $5,062,000 in the first quarter of 2013 compared to $4,181,000 in the first quarter of the prior year, an increase of 21%.  The increase is principally due to the increase in commission revenue discussed above.  Equipment segment gross profit decreased to $749,000, or 58% of Equipment segment revenues, for the first quarter of 2013 compared to $1,087,000 or 55% of Equipment segment revenues, for the same quarter of 2012.  Equipment segment gross profit declined due to lower equipment sales in the first quarter of 2013.  Gross profit margin on EECP® equipment improved as a result of lower production costs arising from the acquisition of LET, our primary supplier of certain EECP® systems.  Gross profit in the Equipment segment is dependent on a number of factors, particularly the mix of new and refurbished EECP® systems and the mix of models sold, their respective average selling prices, the mix of EECP® units sold, rented or placed during the period, the ongoing costs of servicing EECP® systems, and certain fixed period costs, including facilities, payroll and insurance.
 
Sales Representation segment gross profit was $4,313,000, or 72%, for the three months ended March 31, 2013 as compared to $3,094,000, or 76%, for the three months ended March 31, 2012.  The increase was due to higher revenue in this segment, as explained above.  Cost of commissions of $1,696,000 and $963,000, for the three months ended March 31, 2013 and 2012, respectively, reflects commission expense associated with recognized commission revenues, and, starting in 2013, additional costs associated with the medical device excise tax imposed by the Affordable Care Act.  Commission expense associated with deferred revenue is recorded as deferred commission expense until the related commission revenue is earned.

Operating Loss

Operating loss was $682,000 for the three months ended March 31, 2013 as compared to an operating loss of $1,301,000 for the three months ended March 31, 2012, a decrease of $619,000.  The decrease in operating loss was primarily attributable to improved operating performance in the Sales Representation segment, where operating income was $362,000 for the first quarter of 2013 compared to an operating loss of $796,000 in the same quarter of the prior year.  Partially offsetting the improvement in the Sales Representation segment was an increase in operating loss of $486,000 in the Equipment segment to $643,000 in the first quarter of 2013 from an operating loss of $157,000 in the same period of the prior year.

Selling, general and administrative (“SG&A”) expenses for the first quarter of 2013 and 2012 were $5,604,000, or 77% of revenues, and $5,330,000, or 88% of revenues, respectively, reflecting an increase of $274,000 or approximately 5%. The increase in SG&A expenditures in the first quarter of 2013 resulted primarily from increased costs in the Sales Representation segment of approximately $238,000 associated with the extension of the GEHC contract (see Note M).  The cost increase resulting from the GEHC contract extension is a non-recurring charge that will be completed in the second quarter 2013.

Research and development (“R&D”) expenses of $140,000, or 2% of revenues (11% of Equipment segment revenues), for the first quarter of 2013 decreased by $12,000, or 8%, from $152,000, or 3% of revenues (8% of Equipment segment revenues), for the first quarter of 2012. The decrease is primarily attributable to a decrease in clinical research and regulatory expenses.

 
Page 17

 
Vasomedical, Inc. and Subsidiaries
 
Interest and Other Income, Net

Interest and other income, net for the first quarter of 2013 was $40,000 as compared to a net expense of $28,000 for the first quarter of 2012. The improvement was due to certain non-recurring non-operating expenses incurred by our Chinese subsidiaries in the first quarter of 2012 as well as higher interest earnings on the Company’s cash balances.

Amortization of Deferred Gain on Sale-leaseback of Building

The amortization of the deferred gain on the sale-leaseback of our Westbury, NY facility for the first quarter of 2012 was $13,000.  The deferred gain was fully amortized in the third quarter of 2012.

Income Tax Expense

During the first quarter of 2013 we recorded an income tax expense of $8,000 as compared to an income tax expense of $25,000 for the first quarter of 2012.  The decrease arose from reduced tax expense at our Chinese subsidiaries.

Liquidity and Capital Resources

Cash and Cash Flow

We have financed our operations from working capital.  At March 31, 2013, we had cash and cash equivalents of $12,899,000, short-term investments of $111,000 and working capital of $6,168,000 compared to cash and cash equivalents of $11,469,000, short-term investments of $110,000 and working capital of $7,538,000 at December 31, 2012.

Cash provided by operating activities was $1,497,000 during the first three months of 2013, which consisted of a net loss after adjustments to reconcile net loss to net cash of $321,000, offset by cash provided by operating assets and liabilities of $1,818,000. The changes in the account balances primarily reflect a decrease in accounts and other receivables of $4,359,000, partially offset by decreases in deferred revenue of $1,786,000 and accrued commissions of $863,000.  Under the GEHC Agreement the Company earns progressively higher commission rates as calendar year targets are met, and this commission structure has a significant impact on our cash flows. As we achieve these targets the higher commission rates are retroactively applied to all sales in the calendar year, and therefore, the significantly higher commission billings and recognized revenue generated in the fourth quarter of 2011 resulted in significant cash inflows in the first quarter of 2012.  As we previously reported in our Annual Report on Form 10-K for the year ended December 31, 2012, lower commission rates were earned in 2012 than in 2011, resulting in lower cash inflows in the first quarter of 2013.
 
Cash used in investing activities during the three-month period ended March 31, 2013 was $12,000 for the purchase of  equipment and software.

Liquidity

The Company expects to achieve profitability and continued positive cash flow through reaching a higher commission rate under the GEHC Agreement, growth in our China operations and by expanding our product portfolio.  In addition, the Company plans to pursue other accretive acquisitions in the international and domestic markets and to expand our sales representation business.

While we expect to generate positive operating cash flows for 2013, the progressive nature of the commission rates under the GEHC Agreement can cause related cash inflows to vary widely during the year.

 
Page 18

 

Evaluation of Disclosure Controls and Procedures
 
Disclosure controls and procedures reporting as promulgated under the Exchange Act is defined as controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.  Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our CEO and our CFO have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2013 and have concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2013 due to insufficient controls and management review over the recording of certain transactions, and the lack of accounting personnel with appropriate level of knowledge and experience in accounting principles generally accepted in the United States of America and related accounting systems and the closing process at our China subsidiaries.  The Company has engaged additional accounting personnel, and has implemented a review process of its closing procedures, related disclosures, and the approval of certain transactions.

Changes in Internal Control Over Financial Reporting

There was no change in the Company’s internal control over financial reporting during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
 
 
Page 19

 




 
 
Exhibits

31
Certifications of the Chief Executive Officer and the Chief Financial Officer pursuant to Rules 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32
Certifications of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


 
Page 20

 



In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


                                                                                VASOMEDICAL, INC.

 By:          /s/ Jun Ma                                           
Jun Ma
 
President and Chief Executive Officer
 
(Principal Executive Officer)

/s/ Michael J. Beecher   .
Michael J. Beecher
 
Chief Financial Officer and Principal Accounting Officer

Date:  May 15, 2013
 
 
Page 21

 
 
EX-31 2 vaso10qmarch2013-ex31.htm vaso10qmarch2013-ex31.htm
EXHIBIT 31.1
 
CERTIFICATION PURSUANT TO RULE 13a/15d OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jun Ma, certify that:

1.  
I have reviewed this quarterly report on Form 10-Q of Vasomedical, Inc. and subsidiaries (the “registrant”);

2.  
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.  
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.  
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.  
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.  
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.  
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
b.  
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
/s/ Jun Ma                         .
Jun Ma
President and Chief Executive Officer

Date: May 15, 2013
 
 
 

 
 
EXHIBIT 31.2
 
CERTIFICATION PURSUANT TO RULE 13a/15d OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael J. Beecher, certify that:

1.  
I have reviewed this quarterly report on Form 10-Q of Vasomedical, Inc. and subsidiaries (the “registrant”);

2.  
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.  
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.  
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.  
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.  
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.  
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
b.  
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
/s/ Michael J. Beecher           .
Michael J. Beecher
Chief Financial Officer

Date: May 15, 2013
EX-32 3 vaso10qmarch2013-ex32.htm vaso10qmarch2013-ex32.htm
EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Vasomedical, Inc. and subsidiaries (the “Company”) on Form 10-Q for the period ending March 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jun Ma, as President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Jun Ma                          
Jun Ma
President and Chief Executive Officer

Dated: May 15, 2013
 
 
 
 
 

 






EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Vasomedical, Inc. and subsidiaries (the “Company”) on Form 10-Q for the period ending March 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael J. Beecher, as Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



/s/Michael J. Beecher             
                     Michael J. Beecher
Dated: May 15, 2013                                                                                                 Chief Financial Officer

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Certain information and disclosures normally included in the condensed consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in connection with the audited consolidated financial statements and related notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the SEC. These condensed consolidated financial statements include the accounts of the companies over which we exercise control. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of interim results for the Company. 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width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">&#160;</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">&#160;</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td></tr><tr style="background-color: #ffffff;"><td valign="bottom" style="width: 52%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">&#160;</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">&#160;</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">&#160;</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">&#160;</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td></tr><tr bgcolor="white"><td valign="bottom" style="padding-bottom: 2px; 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width: 9%; font-family: times new roman; font-size: 10pt;">&#160;</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">&#160;</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">&#160;</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">&#160;</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td></tr><tr bgcolor="#cceeff"><td align="left" valign="bottom" style="width: 52%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Revenues from external customers</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: left; width: 1%; 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